The government’s relief package for the tourism sector announced yesterday is a timely shot in the arm for the beleaguered industry, as it gears up for a recovery in travel, with lockdowns after the second Covid-19 wave easing.

The measures, including a Rs 60,000 crore loan guarantee scheme for sectors impacted by the pandemic – and within that, working capital/personal loans to travel and tourism stakeholders – are expected to put capital in the hands of hard-hit tour operators and other stakeholders to restart business.

The central government also has announced free one-month tourist visas for the first five lakh tourists once global air travel opens up.

We expect a material take-off only after vaccination rates rise and inbound and outbound travel is fully opened.

Says Manish Gupta, Senior Director, CRISIL Ratings, “Guaranteeing working capital or personal loans of up to Rs 10 lakh for travel and tourism players and up to Rs 1 lakh for travel guides is expected to benefit ~11,000 stakeholders. This will help them service existing obligations, leading to an interest cost savings of 200-300 bps, and help restart businesses. The move to provide five lakh free one-month tourist visas till March 31, 2022 amounts to only a Rs 100 crore allocation, but importantly, it sends out a message that India is getting ready to welcome tourists. This could provide a boost to budget-conscious travellers before the inbound season, which typically starts from October.”

The expansion of the Emergency Credit Line Guarantee Scheme (ECLGS) by Rs 1.5 lakh crore to Rs 4.5 lakh crore for sectors impacted by the pandemic is also a positive.

The highly fragmented tourism sector includes stakeholders such as travel agencies, individual travel agents, car rental agencies and tourist guides whose businesses were practically wiped out as the pandemic put a stop to travel.

But all these measures only sets the stage for what the sector critically needs – opening up of inbound and outbound travel, which is currently very restricted. With improved vaccination rates, we expect opening up in the second half of this fiscal, but that would also be contingent on policies of foreign countries. Domestic travel though should start to bounce back, as state-level lockdowns ease. This would be crucial for the industry to claw back to 35-40% of business this fiscal compared to pre-pandemic (fiscal 2020) levels¹.

¹ https://www.crisil.com/en/home/newsroom/press-releases/2021/06/for-travel-operators-second-wave-clogs-rebound-route.html